17 Sep

‘Thriving’ US Steel Companies Face Moment of Truth

WRITTEN BY Mohit Oberoi, CFA
  • US steel stocks have been strong this month. Yesterday, Nucor released its third-quarter earnings guidance, which was below expectations.
  • U.S. Steel Corporation is set to release its third-quarter guidance shortly. Its guidance and comments could offer insights into the industry’s health.

We’re approaching the end of the third quarter. Most steel companies usually release their earnings guidance roughly two weeks before the end of the quarter. Yesterday, Nucor (NUE) released its Q3 2019 earnings guidance. U.S. Steel Corporation (X) and Steel Dynamics (STLD) are slated to release their quarterly guidance shortly. AK Steel (AKS) gives annual guidance during its quarterly earnings call only.

‘Thriving’ US Steel Companies Face Moment of Truth

Nucor’s Q3 earnings guidance

Yesterday Nucor (NUE), the largest US-based steel company, provided its third-quarter guidance. The company expects EPS of $0.75–$0.80 in the quarter, compared with $1.26 in 2019’s second quarter and $2.13 in 2018’s third quarter. The EPS guidance was way below expectations, largely due to a non-cash impairment charge of $0.26 per share. However, after accounting for this charge, the top end of Nucor’s earnings guidance was largely in line with estimates.

Nucor’s earnings guidance has spooked investors for three straight quarters now. Markets weren’t impressed with Nucor’s Q3 guidance, and the stock closed 0.82% lower yesterday.

US steel companies’ moment of truth

Steel companies’ third-quarter earnings guidance could be their moment of truth. Nucor expects its third-quarter earnings to be the lowest since the fourth quarter of 2017. Incidentally, Donald Trump announced Section 232 tariffs in the first quarter of 2018. The subsequent rise in US steel prices lifted steel companies’ earnings in the second and third quarters of 2018. However, since then, their earnings have fallen sequentially. Nucor posted record earnings in the third quarter.

Nucor’s comments on demand may be even more worrying. The company said, “Although we still see stability in most of the end use markets that we serve, there has been some softening in automotive, agricultural products and power transmission markets.” However, last month Trump claimed that the US steel industry is “thriving.”

Stay tuned for more guidance

STLD and X are set to release their third-quarter guidance shortly. The guidance could offer insights into what Trump says is a thriving industry. Going by Nucor’s earnings guidance and comments, the US steel industry looks far from thriving.

Latest articles

PayPal stock (PYPL) is trading down today. With earnings due after the market closes, you should buy PayPal stock on the current dip.

This year has been rough for cannabis companies, including Aurora Cannabis (ACB), whose stock is already down 27.82% year-to-date.

The road for Netflix is getting rockier by the day. As it prepares for the imminent streaming wars, it's been caught off guard by a new development.

A Senate bill introduced this week could force Facebook (FB) to support the growth of rivals such as Snapchat. Let's take a closer look.

Over the past five trading sessions, Microsoft stock has closed in the red—making it very attractive for investors before today's earnings announcement.

Solar inverter maker Enphase Energy (ENPH) stock was up more than 4% at 11:10 ET today. ENPH recovered after it fell more than 8% yesterday.